Nik Darlington: It looks like Lord Browne is making the right call on higher education funding

Nik Darlington trained as a strategy & marketing consultant with Simon-Kucher & Partners in London, specialising in higher education strategy and pricing, and co-authored the White Paper ‘How prepared are English universities for a more deregulated undergraduate tuition fees environment’ (June 2010). He is now working as a parliamentary assistant in Westminster.

A draft of Lord Browne's report into higher education funding has made its way into the newspapers (The Spectator's David Blackburn gave a pithy précis). The full report is not due for publication until 11th October but on first glance it appears that Lord Browne will be disregarding Vince Cable's transparently political prod for a graduate 'tax' - or, more appropriately, 'contribution'. If this was Dr Cable's attempt at the Cameroonian art of 'nudging' then it hasn't worked.

We don't have the exact details about Lord Browne’s possible proposals. There will be variations to any fee hike, such as removing limits only for the highest value courses. However, as I and much of the HE sector have expected for quite some time, it will be recommended that the Government permit fees to rise. This will be accompanied by commensurate reforms to financial aid. It has to be for this to work, and I will explain why now.

Also published recently were results from a survey conducted by the NUS, 'revealing' that 70 per cent of students say fees of £7,000 per year would have deterred them from going to university. During my time as a management consultant specialising in HE fees and funding, my colleagues and I came across a number of nonsensical and statistically flawed studies into tuition fees - this is just the latest such example.

Not only is it embarrassingly bad research, it is politically dangerous. It is misleading to the public and to policymakers.

First, the NUS have been asking current or former students. This will not give you a realistic market opinion - these respondents are biased having already paid less than half of that amount for their current or former studies. You have to be putting the question to future students for satisfactory realism. This makes the research criteria and modelling a bit more complicated but, trust me, it is achievable (I can do it with no further mathematical training than a GCSE).

Secondly, the NUS' survey is far too simplistic. When gauging reaction to price you must give survey respondents a range of competitive options to replicate a more realistic purchase decision. Just slapping a series of price tags in front of someone and asking whether they think it is expensive or not, without providing any appropriate context, tells you nothing about decision-making.

Thirdly, the headline fee for university tuition is only half the story. Behind that are student loans and financial aid. With nearly every institution currently charging the full rate of tuition, bursaries and scholarships are the only way for them to differentiate their offer from competitors. This produces a 'net fee' and must always be considered when modelling such pricing functions. The students who are most likely to be put off by a big headline fee of £7,000 are those students that would be eligible for financial aid. Whether or not they know about the financial aid is another matter.

A Sutton Trust report a couple of months ago highlighted that most teenagers are not aware of the financial aid available. This is something that has been consistently apparent in my own research. Universities know that they need to do a better job in advertising state aid and their own scholarships. Many are making good progress here but it is still rare for institutions to get aid to more than three-quarters of students eligible for it.

And that is where the importance of the Browne Review rests. Of course, the media and HE interested parties like the NUS, UCU and university mission groups will jump up and down with excitement about the tuition fees themselves, and understandably so. Yet we mustn't forget that the true impact on the vast majority of students will come in the form of financial aid packages.

Universities in this country need more funding if they are to keep up with international competition - instead, as the OECD has reported, we are slipping down university league tables at a rapid rate. Save a few top institutions, our universities cannot rival those from the US, where 17 universities feature in the world's top 20. Henceforth, British institutions are playing catch up with the rest of the world – in terms of research quality, the ability to attract lucrative foreign students (worth billions to UK plc) and the capacity to hold on to our best academics.

With this simple fact in mind, and the theoretical basis for a 'graduate contribution' - or whatever Cable and Willetts meant - having been ridiculed from all quarters (including the Russell Group, business leaders, Conservative MPs and leading Labour MPs like David Miliband), allowing fees to rise is the right call for our universities. This is plain common sense. Get the financial aid package correct and the fears about students being priced out of higher education look over-hyped.